IAAHS Colloquium – Dresden, Germany The Current State of the Long Term Care The Current State of the Long Term Care Insurance Market in the U.S. Insurance Market in the U.S. Allen J. Schmitz, F.S.A., Consulting Actuary April 29, 2004
Session Overview Session Overview THIS SESSION WILL COVER: � Brief History of LTC financing in the U.S. � Role of public and private programs � Demographic and Cost Information � LTC Insurance Products / Trends � LTC Insurance Risks � LTC Insurance Market Trends Milliman
U.S. LTC History U.S. LTC History Prior to 1800’s: � Family – Old age security meant having children or wealth 1800’s: � Poorhouse – Early welfare system 1900-1940: � Old-Age Homes, Great Depression, Social Security Act Milliman
U.S. LTC History U.S. LTC History 1940-1970: � Government becomes primary payer for nursing home care � Medicare and Medicaid created and costs explode 1970-Today: � Medicare and Medicaid still dominant � Entitlement mentality � LTC financing crisis is becoming apparent Milliman
U.S. LTC – – Public & Private Roles Public & Private Roles U.S. LTC PUBLIC - Limited home care based on need Medicare - Nursing home care up to 100 days - Funded by payroll tax - For low income individuals Medicaid - Funded by general taxation Milliman
U.S. LTC – – Public & Private Roles Public & Private Roles U.S. LTC PRIVATE Insurance - Sales growth - Low penetration - Consumer education - Costly / emotional burden Self Fund - Continuing care retirement Other communities (CCRCs) Milliman
U.S. LTC – – Public & Private Roles Public & Private Roles U.S. LTC COST INFORMATION Out-of-Pocket Medicaid 23 45 Public Payers Private Insurance Other Public 11 3 Other Private Medicare 4 14 Note: Amounts do not include unpaid care provided by family member or other informal caregivers or expenditures Milliman for nursing home and home health services provided by hospital-based entities. Source: GAO analysis of 2000 data from the Centers for Medicare and Medicaid Services and The MEDSTAT Group
U.S. LTC – – Demographics Demographics U.S. LTC ELDERLY POPULATION 80 Number (in millions) 14.3 70 60 6.8 50 40 4.3 62.9 30 47 85 and older 20 30.5 65-84 years old 10 0 2000 2020 2040 Source: Bureau of the Census, “Projections of the Total Resident Population by 5-Year Age Groups Milliman and Sex With Special Age Categories: Middle Series”, selected years 2000 to 2040 (Jan. 2000).
U.S. LTC – – Demographics Demographics U.S. LTC NURSING HOME POPULATION 6 s ) n m i l l i o n u m b e r ( i N 5 4 2.69 3 2.04 1.46 2 85 and over 1.98 75-84 years old 1.26 1 1.05 65-74 years old 0.65 0.57 0.33 0 2000 2020 2030 Milliman Source: American Council of Life Insurance
U.S. LTC – – Demographics Demographics U.S. LTC Italy 22.3 SELECT Greece 22.3 COUNTRIES Sweden 21.9 PERCENTAGE Japan 20.9 OF Germany 20.9 POPULATION United Kingdom 20.5 AGES 60+ France 20.3 Hungary 19.6 Czech Republic 18.1 Uruguay 17.3 United States 16.5 Source: U.S. Bureau of the Census (1996). 0 5 10 15 20 25 Milliman
U.S. LTC – – Demographics Demographics U.S. LTC SELECT COUNTRIES POPULATION AGES 80+ AS A PERCENTAGE OF TOTAL POPULATION 1998 3.0% Canada 4.5% 2020 3.7% France 6.1% 3.6% Germany 7.2% 4.0% Italy 7.6% 3.4% Japan 7.8% 4.0% UK 5.2% 3.2% U.S. 3.8% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Milliman Source: U.S. Bureau of the Census, International Database (1998).
LTC Insurance – – Products/Trends Products/Trends LTC Insurance PRODUCTS: � Guaranteed Renewable � Level Premium for Life of Policy � Benefit Trigger – ADL (Activity of Daily Living) – CI (Cognitive Impairment) � Nursing Home, Assisted Living, Home Health Care � Integrated Benefit Designs Milliman
LTC Insurance – – Products/Trends Products/Trends LTC Insurance PRODUCTS: (continued) � Benefit Periods / Lifetime Maximum � Elimination Periods � Inflation Protection � Tax-Qualified vs. Non-Tax-Qualified – 90-Day Certification – Medical Necessity Trigger – Tax Reserves – Treatment of Benefits and Premiums Milliman
LTC Insurance – – Products/Trends Products/Trends LTC Insurance TRENDS: � Group vs. Individual � Younger Issue Ages � Combination Products � New Benefit Features – “Shared Care” – Disability Structure � Regulatory Considerations Milliman
LTC – – U.S. Market Trends U.S. Market Trends LTC LTC POLICIES SOLD 1987-2001 (in 000’s) 9,000 8,261 8,000 7,529 6,831 7,000 6080 6,000 5,542 4,960 5,000 4,351 3,837 4,000 3,417 2,930 3,000 2,430 1,930 2,000 1,550 1,130 815 1,000 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Milliman Source: HIAA LTC Insurance Market Surveys
LTC – – U.S. Market Trends U.S. Market Trends LTC COMPANIES SELLING LTC 1987-2001 160 143 137 135 135 140 118 121 125 120 119 121 124 118 120 105 100 75 80 60 40 20 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000- 2001 Milliman Source: HIAA LTC Insurance Market Surveys
LTC – – U.S. Market Trends U.S. Market Trends LTC Percentage Average of Policies Percentage Long-Term Age of Percentage of Sold as of of Policies Care Buyer in Companies* 12/01 Sold in 2001 Product 2001 (n=137) (n=8.26 million) (n=732,000) Individual and 81% 80% 76% 62 Group Association Employer- 10% 16% 24% 46 Sponsored Long-Term Care as Part 13% 5% NA 66 of a Life Insurance Policy * Totals more than 100% because some companies sell in more than one type of market. Source: HIAA LTC Insurance Market Surveys Milliman
LTC – – U.S. Market Trends U.S. Market Trends LTC With With 5% Compounded Non-forfeiture With IP & Age Base Inflation Protection (IP) Benefit (NFB) NFB COVERAGE AMOUNT: $100 daily benefit amount, 4 years of coverage, and 20-day elimination period 40 $310 $641 $387 $786 50 $401 $849 $502 $1,022 65 $996 $1,726 $1,219 $2,261 79 $4,180 $5,821 $5,087 $7,002 COVERAGE AMOUNT: $150 daily benefit amount, 4 years of coverage, and 90-day elimination period 40 $396 $834 $498 $1,001 50 $510 $1,009 $642 $1,369 65 $1,263 $2,273 $1,554 $2,988 79 $5,265 $7,588 $6,379 $8,883 * Eleven sellers were identified as having sold 80% of all individuals and group association long-term care insurance policies in 2001. Milliman Source: HIAA LTC Insurance Market Surveys
LTC – – U.S. Market Trends U.S. Market Trends LTC STATE-BY-STATE LTC MARKET PENETRATION 15+% 10-14% 6-9% Milliman 1-5% Source: HIAA LTC Insurance Market Surveys
U.S. LTC – – Insurance Market Trends Insurance Market Trends U.S. LTC Rank Company 2003 Sales Growth 2002 Sales 2001 Sales 1 GE Capital $230,399,416 -7% $248,444,000 $242,584,666 2 John Hancock Mutual 197,678,563 51% 131,093,179 99,724,645 3 Conseco Companies 63,302,207 -20% 78,700,000 98,320,220 4 Aegon 49,220,000 -22% 63,185,000 62,680,000 5 Lincoln Benefit 47,789,203 36% 35,040,699 24,624,404 6 UNUM Life of America 44,422,233 -31% 64,369,137 54,711,303 7 MetLife 40,593,030 66% 24,449,000 17,564,000 8 CNA Insurance 33,000,000 -57% 75,927,000 62,828,000 9 Prudential 29,456,242 10% 26,869,758 17,938,517 10 State Farm 23,388,681 -21% 29,752,236 20,815,490 11 Mutual of Omaha 20,487,624 -21% 25,879,692 18,231,929 12 Mass Mutual 20,105,207 26% 15,900,731 10,671,632 13 State Life 19,177,395 81% 10,595,246 Milliman
U.S. LTC – – Insurance Market Trends Insurance Market Trends U.S. LTC Company 2003 Sales Growth 2002 Sales 2001 Sales Rank 14 New York Life $18,635,099 8% $17,217,040 $14,234,341 15 Northwestern Mutual 16,918,000 31% 12,925,819 9,102,378 16 Allianz Life 11,797,672 -72% 41,397,955 41,682,858 17 MedAmerica 9,314,000 16% 8,050,000 6,430,000 18 Equitable 9,299,406 9% 8,534,209 5,591,311 19 Penn Treaty 8,950,498 -26% 12,110,000 47,155,876 20 TIAA 7,003,608 4% 6,728,188 9,299,394 21 Thrivent 5,158,779 -82% 28,084,503 30,250,898 22 Guarantee Trust Life 4,124,855 -17% 4,943,155 1,658,777 23 Knights of Columbus 3,710,179 7% 3,461,701 3,846,334 24 IDS Life 2,295,176 -91% 25,377,677 28,429,023 25 Combined of America 1,600,000 -49% 3,150,000 3,745,672 Grand Total 917,827,073 -8% 1,002,185,925 932,121,668 Milliman
U.S. LTC – – Insurance Risks Insurance Risks U.S. LTC Pricing Risk: � Morbidity – Limited Insured Data – “Long Tail” Risk – Home Health Care versus Nursing Home � Persistency � Investment Income � Expenses � Profit Levels Milliman
U.S. LTC – – Insurance Risks Insurance Risks U.S. LTC Regulatory Environment: � Federal Government Involvement in Financing of LTC � State Insurance Departments � Rate Stabilization Measures Milliman
U.S. LTC – – Insurance Risks Insurance Risks U.S. LTC Underwriting and Claims Adjudication: � Cognitive Screening � “Lifestyle” Underwriting � Telephone Interview and Medical Records � Care Management Milliman
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